Cambodia property market hit by the global financial crisis

The global financial crisis spread and hit hardly across the world. The surging value of real estate, construction, and property in the last few years has been affected by the world economic slowdown since 2007. Due to the impact of the economic downturn, Cambodia’s property agencies have closed down its door and the prices of real estate continues to decline one third of its value in the first quarter of 2009 in comparison with the same period last year.

In a bid to protect the local bankers with the impact of global financial crisis, the National Bank of Cambodia (NBC) raised reserve requirement from 8% to 16% in May 2008 and also limited the amount of real estate loans a bank can make to just 15% of its total credit portfolio. In February 2009, the central bank agreed with proposal from the local bankers to cut down the bank reserve requirement from 16% to 12% in an attempt to eliminate the restriction on real estate.

Making transparency in prices is needed to increase confidence among investors and property buyers. Therefore, the Real Estates agents have agreed to form the National Valuers Association of Cambodia (NVAC) in August 2008 with support from the ministry of finance. Sung Bonna, CEO of Bonna Realty Group, was voted as new president of the Association. All real estate licenses are issued by the ministry of economy and finance.

Even though without the guideline from the central bank, it is not sure that the commercial banks would be lending much for property at the moment given how much uncertain the property market is. Some developers are asking the threshold in the guideline to be boosted as much as 45% to 50% of bank’s total loan portfolio.

Sung Bonna, CEO of Bonna Realty Group and president of NVAC was quoted by the Phnom Penh Post as saying that “according to our research, the real estate market dropped 40% in the first three months in 2009 if we compare the situation to the first three months in 2008,” he added that land in Boeung Keng Kang I commune, worth between US$2,500 and $2,800 per square meter during the first quarter of 2008, had fallen to between $1,600 and $2,000 in the same period this year.

Before and after the national election in July, 2008, the land price have dropped somewhere between 20 and 25% in Phnom Penh from a historic peak. Land value continued decreasing due to the border tension with Thailand and the world financial crisis. In addition, the fall comes after prices grew somewhere between 50% and 80% in 2007, and a further 80 to 100% in the first half of 2008, reaching as high as US$5,000 per square meter in some prime central city locations.

“I see only sellers announcing they want to sell land in hurry Kong Vansophy, general manager of the Dream Town development in Phnom Penh, quoted by the Phnom Penh Post. He added that there were few people looking to buy land and housing.

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